Big investors offer ‘key solution’ to Dublin’s housing crisis

A new report by agent Hooke & MacDonald has described claims that large-scale international investors are depriving aspiring first-time buyers of the opportunity to buy homes as being both a “fallacy” and a “misrepresentation” of the “practical realities of apartment construction and the market”.

Commenting on the rapid rise of Dublin’s build-to-rent (BTR) sector and its relative impact on the level of traditional home ownership within the capital, Hooke & MacDonald says a “large proportion” of the new apartment developments now being built would never have been viable in the absence of institutional investors.

The authors of the latest Dublin Private Rented Sector Investment Report add: “The growth of the BTR and institutional investment sector is not a problem for the housing market. It is actually one of the key solutions, which is identified by Government policy, and any attempt to curtail its expansion rather than support it would be damaging to the supply and cost of rental accommodation.”

Rental market

And while institutional landlords may be a new phenomenon for the Irish residential rental market, Hooke & MacDonald says their role in the sector is not entirely dissimilar to the one played by the small-scale investors who were active in Dublin in the mid 1990s.

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This original cohort of buy-to-let landlords made the development of a large proportion of new apartment buildings viable in cases where the existence of owner occupiers and first-time buyers could not, they argue.

Notwithstanding the validity or otherwise of Hooke & MacDonald’s position, the ongoing housing crisis has seen the large-scale purchase of apartment blocks by institutional investors come in for increasing scrutiny.

The first three months of 2019 alone saw five private rented sector (PRS) transactions with a combined value of €88 million taking place in Dublin, three of which were new-build and two of existing stock. The new-build comprised 210 units and the existing 70.

The most valuable of these transactions was the €38.2 million sale by Glenveagh Properties of 118 units at Taylor’s Hill in Balbriggan, and Semple Woods in Donabate, to Ires Reit.

The next most valuable deal took place off-market, and saw 55 new-build units in North Dublin change hands for €18.5 million.

Ires Reit accounted for the third most valuable transaction also, with its €14.3 million acquisition from receivers of a mix of 53 houses and apartments at The Coast in Baldoyle.

The fourth and fifth deals in terms of value saw 37 new-build units in North Dublin and 17 existing units at St Helen’s Court in Dún Laoghaire sold for €13.1 million and €4.1 million respectively.

In terms of the overall level of investment, the report notes that the private rented sector accounted for 15 per cent of all activity in the Dublin market in the first quarter of this year. While that represents a significant decrease on the 30 per cent recorded in the final quarter of 2018, the authors say they expect the figure to return to close to 30 per cent in the second quarter when a number of sale-agreed deals are contracted.

The most significant of these transactions will see developer Seán Mulryan’s Ballymore and its Singaporean-headquartered partners, Oxley, conclude their sale for €175.5 million of 268 apartments at Dublin Landings to US-headquartered property giant Greystar.

A total of 1,093 residential units distributed across 12 Dublin developments have been put up for sale since the beginning of this year. The most valuable offering comprises 295 apartments at Park Developments’ Clay Farm scheme in Leopardstown, in south Dublin.

Joint agents Cushman & Wakefield and Sherry FitzGerald are guiding a price of €130 million for the portfolio. The figure accounts for approximately 36 per cent of the combined €359 million value of the PRS schemes offered to the market since January.

Public perception

While the sale of these high-profile developments is unsurprisingly fuelling the public’s perception that developers have largely dispensed with the construction of new homes for individual buyers in favour of apartment schemes for the private rented sector, Hooke & MacDonald says this is not the case.

Rather, they point out that most of the major builders are following what they describe as a “twin-tracked” strategy.

Among the developers now engaged in both the sale of new homes and the supply of BTR apartment schemes are Ballymore, the Cosgrave Group, Flynn & O’Flaherty, Cairn Homes, Glenveagh Properties, Harcourt Developments, Castlethorn, Twinlite, Gannon Homes, Ardstone, Cannon Kirk and dRes.

Elsewhere in its report, Hooke & MacDonald says the majority of the private rental market in Dublin continues to be dominated by landlords with just one or two properties. Less than 5 per cent of tenancies are controlled by landlords with 100 tenancies or more, the report says.

And while the concentration of tenancies held by major institutional investors is higher in Dublin than it is nationally, it is still dwarfed by small private investors who remain active in the sector.